10. Economic and Financial Analysis

10. Economic and Financial Analysis

10 - 1

10. Economic and Financial Analysis

10.1. Construction Cost

The construction cost for the Sihanoukville Combined Cycle Power Plant is estimated

to be 100.2 Million for Stage 1 and 74.6 Million for Stage 2 as shown in Table 10.1-1

and cost breakdown are shown in Table 10.1-2 and Table 10.1-3.

Table 10.1-1 Summary of Construction Cost

(Million US$)

Stage F/C Portion L/C Portion Total

Stage 1 83.6 16.6 100.2

Stage 2 65.4 9.3 74.6

Total 149.0 25.9 174.8

Note: The estimate construction cost is as of 2001 price level and the associated T/L is exclusive.The total is not matched due to the round off.

The construction costs were estimated on the following basis:

Cost estimates for equipment and materials, which are deemed to be fabricated and im-

ported from foreign countries, are based on international competitive market prices

with referring to actual contract or bidding prices for a similar combined cycle power

plant. Basically most of the mechanical and electrical equipment are assumed to be im-

ported.

Cost of materials, which are available in Cambodia, are estimated on the basis of the

data collected during the study.

The labor costs for erection works for equipment are estimated on the basis of reference

costs in neighboring countries, but the labor costs for civil and architectural works are

based on the cost in actual projects in Cambodia.

Construction cost includes the costs for access road, oil fuel pipeline from Sokimex Oil

10 - 2

Terminal to the plant, improvement of regional road and bridges from Sihanoukville

port to the plant and temporary relocation works for road and railroad nearby the plant

site.

Land acquisition cost

Land acquisition cost is estimated based on the unit land cost which was given by the

Sihanoukville Municipality, i.e. 2.3 US$ per square meter. The required area is esti-

mated 32 ha.

Resettlement fee

At present only four households exist in the plant site area. However, for estimates of

resettlement fee, the number of households are estimated 10, and unit resettlement fee

is estimated 3,000 US$ with referring to the cost used in the transmission project in

Cambodia.

Cost of mine survey

The cost of mine survey is estimated by using the unit cost which was given by CMAC,

i.e. 0.6 $/m2. This unit cost is that for an actual mine sweeping work (named “Level 3”)

which is carried out by CMAC in response to the governmental institution’s request.

F/C L/C Total F/C L/C Total

Mechanical 44,290 3,330 47,620 41,100 3,090 44,190

Electrical 19,250 1,230 20,480 14,610 930 15,540

Civil Works 5,450 6,650 12,100 2,520 3,090 5,610

Building & Structure 3,400 1,830 5,230 1,570 850 2,420

Spare Parts & Others 6,720 0 6,720 3,470 0 3,470

Subtotal 79,110 13,040 92,150 63,270 7,960 71,230

Training 100 0 100 50 0 50

Owner's Administration Fee (3%, 2%) 0 2,600 2,600 0 1,300 1,300

Engineering Consultant Fee (5%, 3%) 4,390 0 4,390 2,040 0 2,040

Land Acquisition 0 740 740 0 0 0

Resettlement & Compensation 0 30 30 0 0 0

Mine Survey 0 190 190 0 0 0

Subtotal 4,490 3,560 8,050 2,090 1,300 3,390

Grand Total 83,600 16,600 100,200 65,360 9,260 74,620

Note : Mechanical, Electrical, Civil Works, Building & Structure, and Spare Parts & Others include Physical Contingency of 5 %.

F/C L/C TotalAssociated Transmission Line(Site ~ Kampot) 8,640 2,160 10,800

Table 10.1-2 Estimate of Construction Cost (as of 2001 )

Stage-1 Stage-2(unit :1,000 US$)

10 - 3

Table 10.1-3 Breakdown of Construction CostUnit: 1000 US$

Item Quantity Cost Quantity Cost TotalMechanical Gas turbine and associated equipment 3 22000 3 22000 44000

Steam turbine and associated equipment 1 6500 1 6500 13000HRSG and associated equipment 3 6600 3 6600 13200Fuel gas supply system L.S. 570 L.S. 570 1140Fuel oil storage and supply system L.S. 580 L.S. 580 1160Cooling water system L.S. 1200 L.S. 1200 2400Plant pipings L.S. 1800 L.S. 1600 3400Water treatment system L.S. 840 L.S. 420 1260Wastewater treatment & incineration L.S. 400 L.S. 50 450Fire prevention and protection system L.S. 1200 L.S. 500 1700Emergency diesel generator 1 130 - 0 130Crane, mobile equipment incl. fire engine L.S. 1700 L.S. 500 2200Other mechanical equipment L.S. 830 L.S. 570 1400Stacks 1 1000 1 1000 2000

Subtotal 45350 42090 87440Electrical Control and instrumentation L.S. 7700 L.S. 6500 14200

Plant electrical equipment L.S. 8900 L.S. 7600 16500In-plant substation L.S. 2900 L.S. 700 3600

Subtotal 19500 14800 34300Civil and Structural Land formation L.S. 430 L.S. 0 430Works River diversion L.S. 420 L.S. 0 420

Equipment foundation and Others L.S. 2160 L.S. 1640 3800Water storage tank proper L.S. 500 L.S. 500 1000Wastewater treatment facilities L.S. 300 L.S. 100 400In-plant road L.S. 910 L.S. 0 910Drainage system L.S. 1580 L.S. 0 1580Cooling water pipe & system L.S. 3100 L.S. 3100 6200Access road L.S. 110 L.S. 0 110Improvement of regional road & bridge L.S. 310 L.S. 0 310Temporary works (relocation of road/railroad) L.S. 1700 L.S. 0 1700Power house 1 3600 Extension 2300 5900Administration building 1 900 - 0 900Other miscellaneous buildings L.S. 450 - 0 450Security fencing, plantation, etc. L.S. 30 - 0 30

Subtotal 16500 7640 24140Spare Parts Spare parts 4000 3000 7000and Others Special tools and workshop machines 1500 0 1500

Laboratory equipment 600 0 600Consumables 300 300 600Subtotal 6400 3300 9700Grand Total of Construction Works 87750 67830 155580

Miscellaneous Training L.S. 100 L.S. 50 150Expense Owner's administration fee 3 % 2600 2 % 1300 3900

Engineering consultant fee 5 % 4388 3 % 2035 6423Fhysical contingency (5%) 5 % 4388 5 % 3392 7780Land acquisition cost (2.3 $/m2) 32 ha 736 0 0 736Resettlement fee (3,000 $/one) 10 houses 30 0 0 30Mine survey cost (0.6 $/m2) 32 ha 192 0 0 192

Subtotal 12434 6777 19211

100,184 74,607 174,791

Stage 1 Stage 2

Total Project Cost

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10 - 4

10 - 5

10.2. Economic Analysis

10.2.1. Objective

Economic analysis is carried out to verify the economic validity of the implementa-

tion of project from the viewpoint of the whole Cambodian economy.

10.2.2. Methodology of Economic Analysis

The Sihanoukville Combined Cycle Power Plant is proposed currently to meet the

future power demand. If the project is not implemented, the implementation of an al-

ternative power plant, of which installed capacity is equivalent to the project, shall be

required to attain the same objective.

Therefore, the economic validity of the project can be measured in a way of cost

comparison between the project and the alternative power plant.

Concerning the cost comparison, “With - Without” method is commonly used in the

economic analysis for the power sector. “With” means the proposed project (Siha-

noukville Combined Cycle Power Plant) and “Without” means the alternative project

(such as diesel power plant etc.).

10.2.3. Judgment of Economic Validity

The economic validity of the project is verified by using the following economic pa-

rameters:

(1) Economic Internal Rate of Return (EIRR)

The EIRR can be defined as the rate of discount, which equalizes the discounted

gross benefits with the discounted gross costs. It can be explained mathematically

as follows:

∑∑== +

=+

n

kk

kn

kk

k

iC

iB

11 )1()1(

Where; Bk : benefit for year k

10 - 6

Ck : cost for year k

i : discount rate

An EIRR of 10% ~ 12 % is set as the hurdle rate normally by the World Bank

and Asian Development Bank and applied to a power sector in the developing

countries. Therefore, if EIRR derived from the above calculation exceed the hur-

dle rate, the economic validity of the project is verified. Otherwise, additional

support data, such as social impact, which cannot be counted in the monetary

term, will be required to implement the project.

(2) Net Present Value (NPV)

The NPV is the most straightforward discounted cash flow measure of the project

worth. It is simply the present value of the cash flow stream, i.e. the net present

value of benefit less the net present value of cost. NPV can be expressed by the

following formula:

∑= +

−=

n

kkkk

rCBNPV

1 )1(

Where; r : hurdle rate

The project having positive NPV is acceptable economically.

(3) Benefit – Cost Ratio (B/C)

The benefit-cost ratio is computed on the basis of discounting the benefit and cost

streams to their present values. It can be expressed as follows:

∑

∑

=

=

+

+== n

kk

n

kk

kCk

rBk

NPVNPV

CB

1

1

)1(

)1(Cost of

Benefit of

If B/C ratio exceeds 1.0, the project is acceptable economically (1.2 is often used

actually).

10 - 7

10.2.4. General conditions for Economic Analysis

The following conditions are applied to the economic analysis.

(1) The commencement of commercial operation for Stage 1 and Stage 2 is assumed

to be September 1, 2006 and September 1, 2008 respectively based on the opti-

mum power development program in Section 2.2. and expected project imple-

mentation schedule in Chapter 9.

(2) Annual capacity factors are set as shown in Table 10.2-1 based on the results of

optimum power development program in Section 2.2.

Table 10.2-1 Capacity Factors of Sihanoukville C.C. Power Plant

Stage 2006 2007 2008 2009 2010 2011 2012 ~

Stage 1 0.24 0.75 0.55 0.63 0.67 0.70 0.50

Stage 2 - - 0.18 0.63 0.67 0.70 0.50

(3) The project cost expressed in US$ term is assumed to be economic price (border

price) because the construction will be carried out based on the international

competitive bid.

(4) The price escalation3 (inflation), subsidies, duties and taxes are excluded in the

economic analysis because those taxes and duties are regarded merely as the do-

mestic transfer of capital.

(5) Engineering and Administration fees are excluded from the project cost in order

to keep the same cost level as that of alternative thermal plant.

(6) The kW value adjustment of the alternative thermal power plant is calculated by

using the following equation:

3 Escalations are sometimes taken into account when the fuel price escalations are envisaged to be different by fuel type

such as oil vs. coal.

10 - 8

A4)A3)(1A2)(1)(1365A1(1

T4)T3)(1T2)(1)(1365T1(1

kW value−−−−

−−−−=

Where; T1 = Scheduled maintenance days of proposed project (days)

T2 = Forced outage rate of proposed project (decimal)

T3 = Station use of proposed project (decimal)

T4 = Transmission and distribution lines loss of proposed project

(decimal)

A1 = Scheduled maintenance days of alternative thermal plant (days)

A2 = Forced outage rate of alternative thermal plant (decimal)

A3 = Station use of alternative thermal plant (decimal)

A4 = Transmission and distribution lines loss of alternative thermal

plant (decimal)

(7) The kWh value adjustment of the alternative thermal plant is also calculated by

using the following formula:

A4)-A3)(1-(1T4)-T3)(1-(1 ValuekWh =

In the above formulas, transmission and distribution lines loss can be negligible

in the economic analysis because the both losses are the same.

(8) The transmission line cost can be negligible in the economic analysis for the

same reason as item (7) above.

10.2.5. Fuel and Fuel Price

CIF prices (Cost, insurance and freight) are used for oil fuels because the all oil fuels

in Cambodia are imported from overseas at the moment.

The average CIF prices of diesel oil and heavy oil are used based on the actual CIF

price record provided by EDC as shown in Section 3.1.

Concerning the natural gas, of which exploring is expected in future; the estimated

exploring cost is envisaged to be higher than the world market and to be consumed in

the domestic due to the less efficiency of the gas reserve. The natural gas price is es-

10 - 9

timated 4 $/MMBTU at power plant site including the markup provisionally.

Table 10.2-2 Fuel Prices for Economic Analysis

Fuel Type Fuel Price (CIF Price) Remarks

Diesel Oil *1) 237 $/MT Average from 1996 Nov. ~ 2001. July

Heavy Fuel Oil *2) 154 $/MT Average from 1996 Nov.~ 2001. August

Natural Gas 4.0 $/MMBTU Engineer’s assumptions (L.H.V. base)3.5 $/MMBTU and 4.5 $/MMBTU are also testified in theeconomic analysis.

Source: *1) and *2) EDC

Fuel price escalation is not considered in the economic analysis because the same es-

calation rate will be applicable to all fuels.

10.2.6. Fuel Shift

Since some fuel types seem to be applicable to the project at the moment, the follow-

ing fuel scenarios are considered in the economic analysis.

(1) Natural Gas will be used for whole period of 20-years economic lifetime from the

beginning (Base Case).

(2) Diesel Oil will be used for the first 5 years and Natural Gas will be used for the

next 15 years.

(3) Diesel Oil will be used for the first 10 years and Natural Gas will be used for the

next 10 years.

(4) Diesel Oil will be used for whole period of 20-years economic lifetime from the

beginning.

In line with the fuel shift for the above items (2), (3) and (4) , the cost of additional

gas treatment system of 1.2 Million US$ for all stages is also considered.

10 - 10

10.2.7. Project Characteristics and Conditions

The project characteristics, which were revealed in the course of the study, and as-

sumed condition, are summarized in Table 10.2-3.

Table 10.2-3 Project Characteristics and Assumed Conditions

Items Value Unit Remarks

Installed capacity 180 MW 90 MW × 2 stages

Capacity Factor(Average 54%) %

2006 2007 2008 2009 2010 2011 2012 ~ST-1 24 75 55 63 67 70 50ST-2 - - 18 63 67 70 50

Construction cost 164.4 M. $ Excluding Engineering and AdministrationFees

Scheduledmaintenance days 49 Days

Forced outage rate 8.0 %

Station use 2.8 %

For kW and kWh adjustments use only

Fixed O/M cost 20.0 $/kW-year

Natural Gas

Fuel price 4.0 $/MMBTU LHV base, domestic price including markup

Heat rate 6,829 BTU/kWh

Fuel cost 27.32 $/MWh

Variable O/M 1.0 $/MWh

Diesel Oil

Fuel price 6.02 $/MMBTU LHV base, CIF Price for Diesel :237 $/ton

Heat rate 7,030 BTU/kWh

Fuel cost 42.32 $/MWh

Variable O/M 2.5 $/MWh

Construction period 2 Years Disbursement schedule are 40 % and 60 %.

Construction start 2004, 2006 2-staged construction

Operation start 2006, 2008 Each operation of 90 MW

Economic life time 20 Years

10 - 11

10.2.8. Alternative Thermal Power Plant

A diesel power plant with equivalent capacity to the project is set as an alternative

thermal power plant in view of current supply system in Cambodia.

Table 10.2-4 shows the plant properties to be used as the representative of equivalent

diesel power plant.

Table 10.2-4 Characteristics of Alternative Diesel and Assumed Conditions

Items Value Unit Remarks

Installed capacity 197.8 MW 98.9 MW x 2 stages, (Middle Speed)

Annual generation GWh2006 2007 2008 2009 2010 2011 2012~

ST-1 192.8 602.4 441.8 506.1 538.2 562.3 401.7ST-2 - - 144.5 506.1 538.2 562.3 401.7

Construction cost 271.0 M.US$ Excluding Engineering and AdministrationFees

Scheduledmaintenance days 28 days

Forced outage rate 20 %

Station use 4.6 %

Fixed O/M cost 21.0 $/kW-year

Variable O/M cost 3.0 $/MWh

Fuel Price 3.99 $/MMBTU LHV base, CIF Price for HFO: 154.0 $/ton

Heat rate 7,888 BTU/kWh HFO

Fuel cost 31.49 $/MWh HFO

Construction period 2 years Disbursement schedules are 50 % and 50 %.

Construction start 2004, 2006 2-staged construction

Operation start 2006, 2008 Each operation of 90 MW

Economic life time 20 years

kW Adjustment 1.099

kWh Adjustment 1.019

10 - 12

10.2.9. Calculation Cases and Results

(1) Calculation Cases

10 calculation cases, with combination of fuel conversion scenario and natural

gas price, are conducted as shown in Table 10.2-5.

Case Nos. 100s, 200s and 300s are focusing on the timing of natural gas fuel

availability and Case No. 400 represents the case of diesel oil for the whole eco-

nomic life time to understand the economic advantage of the natural gas.

Concerning the natural gas price, 4.0, 3.5 and 4.5 $/MMBTU are assumed.

(2) Calculation Results

Table 10.2-5 also presents the results of economic analysis. Typical cases (Case

No. 100, 300, and 400) are demonstrated in Attachments 3.1 to 3.3

The economic indices show the excellent economic performance of the project

except the Case No. 400 because the construction cost of the project is cheaper

than that of the alternative diesel power plant and the natural gas fuel cost is also

cheaper than the heavy fuel oil.

Concerning Case No. 400, EIRR of 3.81 % indicates that the Net Present Value

of Cost becomes lower than the Net Present Value of Benefit on condition that

the discount rate is bigger than 3.81 % (B - C becomes negative if the discount

rate is less than 3.81%).

“B – C” of Case 100 shows about 4 times and B/C of Case 100 also presents 30%

more in comparison Case 400.

Tabl

e 10

.2-5

C

alcu

latio

n C

ases

and

Sum

mar

y of

Res

ults

1.

C

alcu

latio

n C

ases

Se.N

o.1

23

45

67

89

10C

ase

No.

100

110

120

200

210

220

300

310

320

400

AF

uel C

onve

rsio

n Sc

enar

io(1

)N

atur

al G

as fo

r ful

l 20

year

s◎

○○

(2)

Die

sel O

il 5

year

s + N

G 1

5 ye

ars

○○

○(3

)D

iese

l Oil

10 y

ears

+ N

G 1

0 ye

ars

○○

○(4

)D

iese

l Oil

for f

ull 2

0 ye

ars

○

BN

atur

al G

as F

uel P

rice

(1)

4.0

US$

/MM

BTU

◎○

○(2

)3.

5 U

S$/M

MB

TU○

○○

(3)

4.5

US$

/MM

BTU

○○

○

CD

iese

l Oil

Pric

e (C

IF)

(1)

237

US$

/ton

○○

○○

○○

○

Not

e: ◎

mea

ns B

ase

Cas

e.

2.

Cal

cula

tion

Res

ults

Econ

omic

Inte

rnal

Rat

e of

Ret

urn

(EIR

R)

%N

.AN

.AN

.AN

.AN

.AN

.AN

.AN

.AN

.A3.

81*1

Net

Pre

sent

Val

ue o

f Cos

t M

.US$

249.

323

3.7

264.

227

6.3

266.

528

5.5

299.

029

4.1

303.

632

1.7

Net

Pre

sent

Val

ue o

f Ben

efit

M.U

S$34

5.0

345.

034

5.0

345.

034

5.0

345.

034

5.0

345.

034

5.0

345.

0

B -

C

M.U

S$95

.711

1.3

80.8

68.7

78.5

59.5

4650

.941

.423

.3

B/C

1.38

1.48

1.31

1.25

1.29

1.21

1.15

1.17

1.14

1.07

Not

e: N

et P

rese

nt V

alue

as o

f 200

1 is

dis

coun

ted

valu

e w

ith 1

0 %

dis

coun

t rat

e.

N.A

mea

ns E

IRR

>100

%

*1: F

or th

e C

ase

No.

400

, B-C

bec

omes

pos

itive

on

cond

ition

that

the

disc

ount

rate

is h

ighe

r tha

n 3.

81 %

, unl

ess B

-C b

ecom

es n

egat

ive.

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10 - 13

10 - 14

10.3. Financial Analysis

10.3.1. Objective

Financial analysis is carried out to verify the financial feasibility of the project from

the viewpoint of the project owner and lenders. Therefore, market prices, which in-

clude taxes & duties, and subsidiaries, are used in the analysis.

Financial analysis is conducted in US$ term because US$ currency is prevalent in

Cambodia4 as well as Cambodian Riel.

10.3.2. Methodology and Definition of Financial Analysis

The financial Internal Rate of Return (FIRR) is the most commonly used measure in

financial analysis. FIRR consists of Project Internal Rate of Return (Project IRR) and

Return on Equity (ROE) according to the source of fund. Project IRR presents the ex-

pected rate of return on investment, which is fully prepared by own finance. On the

other hands, ROE presents the expected rate of return on equity portion. Therefore,

the former indicator does not depend on the financial (loan) conditions and presents

the financial characteristic of the project itself. The latter indicator presents the finan-

cial improvement of the project by means of imposing the external fund sources. Ac-

cording to World Bank Discussion Papers5, it is said that power developers normally

require at least 20 to 30 % of ROE.

Debt Service Coverage Ratio (DSCR) is one of the financial indices and the Bankers

are generally most concerned on this factor. According to the World Bank data,

DSCR exceeding 1.5 times is recommended. The DSCR is calculated by using the

following equation:

Payment) Interest Repayment (CapitalRevenue SalesNetDSCR+

=

Where, Net Sales Revenue = Sales Revenue – Operation Cost – Profit Tax

The financial levelised production cost (LPC) is generally compared with the power

4 Invoice of power tariff is made in Cambodian Riel and payment is allowed to be done by Riel or US$ term for an example.5 “Submission and Analysis of Proposals for Private Generation Project in Developing Countries”, 1994

10 - 15

tariff. The financial levelised production cost is derived from the following formula:

RateDiscount 10%h Energy wit Salable of NPVRateDiscount % 10Cost with Total of NPV

=LPC

10.3.3. Annual Generation and Salable Energy

(1) Annual Generation

Annual generation energies can be calculated by the capacity factor, which is re-

sulted from the optimum power development program in Section 2.2.

The capacity factors are set as shown in Table 10.3-1 as well as the economic

analysis.

The average capacity factor for the economic lifetime of 20 years is estimated to

be 54%.

Table 10.3-1 Capacity Factors of Sihanoukville C.C. Power Plant

Stage 2006 2007 2008 2009 2010 2011 2012 ~

Stage 1 0.24 0.75 0.55 0.63 0.67 0.70 0.50

Stage 2 - - 0.18 0.63 0.67 0.70 0.50

Note: Annual generation energy for 2007 results in 591.3 GWh (= 90 MW × 0.75 × 8,760 hrs × 0.001)

(2) Station Use and Transmission Loss

The station use is assumed to be 2.8 % as well as economic analysis.

The transmission line loss is assumed as follows:

- Project Site ~ Takeo : 1.7 %　(220 kV × 2 circuits)

- Project Site ~ Phnom Penh : 2.7 % (220 kV × 2 circuits)

- Chau Doc ~ Phnom Penh : 4 % for peak period and 2 % for shoulder period6

The distribution loss in Phnom Penh is set at 13.0%7 based on the EDC’s projec-

6 “Feasibility Study for the First Transmission Link between Phnom Penh and the Southern Region of Cambodia, Project

Review”, page 57, April 2001.7 According to EDC’s information in November 2001, the distribution loss in Phnom Penh around year 2006, EDC proj-

ects 12% ~ 14%.

10 - 16

tion and the total loss from the project site to consumer’s end is assumed to be

15.7% provisionally.

(3) Salable Energy

Based on the above assumptions, the salable energy becomes as follows:

Salable Energy = Generation Energy × (1 – Station Use) × (1 – T/L loss)= Generation Energy × (1-0.028) × (1- 0.157)= 0.8194 × Generation Energy

10.3.4. Construction Cost

The construction cost consists of the construction of the project and the construction

of transmission line from Kampot to the project site (about 83 km). The construction

cost of the transmission line from Phnom Penh to Takeo is assumed to be born by the

World Bank’s Project and from Takeo to Kampot is also assumed to be born by the

German Grant.

The construction cost of the project is estimated by two currencies portion for Stage 1

and Stage 2 respectively.

Table 10.3-2 Estimated Construction Cost (M.US$)

F/C Portion (M.US$) L/C Portion (M.US$) TotalStage No Before

EscalationAfter

EscalationBefore

EscalationAfter

EscalationBefore

EscalationAfter

EscalationStage 1 90 MW 83.6 92.2 16.6 18.2 100.2 110.4Stage 2 90 MW 65.4 75.5 9.3 10.6 74.6 86.1Subtotal 149.0 167.7 25.9 28.8 174.8 196.5220 kVA × 2 lines 8.6 9.4 2.2 2.4 10.8 11.8Total 157.6 177.1 28.0 31.2 185.6 208.3

Note: The above costs exclude duties & taxes, IDC and other financial fees. The total is not matched due to round off.

The price escalation of 2.4 % per annum is considered referring to the ADB Report8.

8 “Provincial Power Supply Project”, Asian Development Bank, November 2000, page 17.

10 - 17

10.3.5. Taxes and Duties imposed on Project

Fig. 10.3-1 presents the taxes and duties imposed on the project. Taxes and duties,

which will be incurred during the construction period, are regarded as the investment

capital of the Royal Government of Cambodia.

Value Added Tax of 10 % is imposed on Foreign and Local Currencies Portion.

Note: STP means Standard Price for Tax Calculation

Note: Profit tax of 20 % is imposed on Year 2001 onwards.

Fig.10.3-1 Taxes and Duties on Project

Import TaxDO:275$/ton x 20%HFO:129$/ton x 7%

FOB + Premium (30 %)

Fuel Price at P/S

Construction Cost F/CPortion

Import of ConstructionEquipment & Material

Import Tax *1)

-15% on Generating Equipment-13% on Distribution Equipment-10% on other imported items

Sales Revenue = Salable Energy x Tariff Rate(Turnover)

Less Operation Expenses - Fixed O/M Cost - Variable O/M Cost - Fuel Cost - Depreciation

Operation Profit/Loss

Other Expenses - Interest Payment

Profit/Loss before TaxProfitProfit Tax

( 20 % of before Tax) Loss

Profit after Tax

Loss after Tax

- Transportation cost- Insurance cost- Margin

CIF Price

Construction

VAT( 10 %)

CommercialOperation

Construction Cost L/CPortion

VAT *1)

( 10 %)

F/C Portion L/C Portion

Profit and LossStatement

Profit Tax Payment

CIF>=STPImport Tax

DO:CIF $/ton x 20%HFO:CIF $/ton x 7%

Import Tax

Social FundSocial Fund

DO:1.40 $/tonHFO:0.81 $/ton

YesNo

VAT *1)

( 10 %)

Note) VAT of 10 % is imposed on Local and Foreign costs excluding Consultant Services

*1) Source: Asian Development Bank "Provincial Power Supply Project", Appendix-5, page1

10 - 18

10 - 19

10.3.6. Power Tariff Forecast

The average power tariff as of 2000 is 554 Riel/kWh9 (or 14.57 ¢/kWh) and the

power tariff rate is shown in Attachment 1.5.

The future power tariff is assumed based on EDC Report, ADB Project Report10 and

the World Bank Project Report11, which are shown in Tables 10.3-3 and 10.3-4.

Table 10.3-3 Future Power Tariff Scenario (Riel/kWh)

2001 2002 2003 2004 2005 2006 2007ADB *1) 652 700 752 728 730 746 778EDC *2) 608 613 620 628 636 646 656

*1) ADB “Provincial Power Supply Project”, November 2000, Appendix-9, Page 4, Table A9.1 *2) EDC Report, page 14

Table 10.3-4 Exchange Rate Forecast (Riel/$) and Power Tariff Forecast (¢/kWh)

2001 2002 2003 2004 2005 2006 2007Exc. Rate *3) 3,971 4,149 4,335 4,530 4,734 4,946 5,169EDC 15.31 14.79 14.31 13.86 13.44 13.06 12.68ADB *4) 16.42 16.87 17.35 16.07 15.42 15.08 15.05World Bank *5) 16.1 16.1 16.1 14.5 13.8 13.4 12.5

*3) EDC Report, page 14 *4) ¢/kWh for ADB portion is calculated by using the above exchange rate. *5) World Bank “Project Overview Report”, Page 58, Table 7

Note: Exchange Rate against US$ is assumed to be devaluated 4.5 % annually by EDC.

Based on the above forecast, the average power tariff from the year 2006 onwards is

assumed to be 13.0 ¢/kWh.

However, the average power tariff consists of the following cost. Therefore, the power

tariff contributing to the project finance is the power tariff less indirect cost.

9 “Prepared and Analyses Study, EDC’s Strategic Planning for Year 2001, 2002 and 2003 within Planning until 2010 “,

Page 14, EDC, November 200010 “Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambo-

dia for the Provincial Power Supply Project” , November 200011 “The World Bank Cambodia Rural Electrification and Transmission Project (PHRD TF025765) Feasibility Study Report

for the Transmission Link between Phnom Penh and the Southern Region of Cambodia, Project Overview”, April 2001

10 - 20

- Direct operation costs (Fuel cost, Fixed O/M and Variable O/M costs)

- Power purchase cost from IPP

- Maintenance cost of transmission and distribution lines

- Overhead cost

Table 10.3-5 data shows the cost related to the power generation of EDC Phnom Penh

Operations from 1997 to 1999.

Table 10.3-5 Cost Related to Power Generation in Phnom Penh Operation (Million Riel)

FY Year 1997 1998 1999

1. Cost Related to Power Generation *1)

Fuel

Diesel Oil 32,255 46,806 23,822

Fuel Oil 5,541 - 10,046

Light Oil & Materials 1,585 1,593 2,429

IPP Purchase 33,133 58,061 73,693

Depreciation 7,780 13,741 11,656

Wages and Salaries 196 818 1,176

Subtotal 80,490 121,019 122,822

2. Total Expenditure *2)

Cost of Sales 74,782 109,918 131,708

Operating Expenses 14,829 40,539 13,776

Cost of Sales + Operating Expenses 89,611 150,457 145,484

Direct Cost Ratio (1/2) 90.32% 80.43% 84.42%*1) Source: Finance and Accounting Department of EDC, September 2001*2) Source: EDC Annual Report 1998, November ,1999, and Finance and Accounting Dpt of EDC, September 2001.

Since the Operating Expenses in 1998 include the provision of bad debt, the direct

cost ratio is estimated by the average of 1997 and 1999 as follows:

% 85 %48.86145,484) (89,611122,822) (80,490 RatioCost Direct ==

++

=

Therefore, power tariff contributing to the project is set at 11.05 ¢/kWh (13 ¢/kWh ×

85% = 11.05).

10 - 21

10.3.7. Fixed and Variable O/M Cost

(1) Fixed O/M Cost

Fixed O/M cost mainly consists of machine repair cost and wage & salaries of the

operation staffs. According to EDC Report, EDC planned the staff costs for the

year 1999 as shown in Table 10.3-6.

Table 10.3-6 EDC Staff Cost in PHN’s for 1999

(Unit: 1,000 US$)

1. Salaries 1,446

2. Social Insurance Charge 232

3. Advantage in kind 63

4. Bonus 176

Total Staff Cost 1,917

Source: “EDC Annual Report 1998, Table 4-8”, Feb. 1999

Since the total staffs in PHN’s as of December 31, 2000 were 1,295 personnel,

the average manpower cost per annum is estimated to be 1,480 US$ per capita

per year provisionally.

On the other hand, proposed staffs for the commercial operation are 151 person-

nel for the two stages. Considering the other related fixed costs, the fixed O/M

cost is assumed as follows:

(a) Stage 1 : Total Fixed O/M cost = 3.62 Million US$ (40.22 $/kW-year)

- Personal Expenses : 1,480 $/capita × 118 person = 0.17 Million US$

- Maintenance cost : 3 % of Plant Cost (ST1) = 101.4 Million US$ × 3%

= 3.04 Million US$

- Insurance etc. : 0.4 % of Plant Cost (ST1) = 101.4 Million US$ ×

0.4% = 0.41 Million US$

10 - 22

(b) Stage 2 : Total Fixed O/M cost = 2.85 Million US$ (31.67 $/kW-year)

- Personal Expenses : 1,480 $/capita × 33 person = 0.05 Million US$

- Maintenance cost : 3 % of Plant Cost (ST2) = 82.2 Million US$ × 3 %

= 2.47 Million US$

- Insurance etc. : 0.4 % of Plant Cost (ST2) = 82.2 Million US$ × 0.4

% = 0.33 Million US$Note : Plant Cost defined here consists of Mechanical Works, Electrical Works, Civil and Structural

Works and Spare Parts.

Since the fixed O/M cost for the associated transmission line is normally 1.0 % of

the investment cost, the fixed O/M cost for the transmission line becomes 0.1

Million US$ (= 11.8 Million US$ × 1 %) and be paid by Stage 1.

(2) Variable O/M Cost

Variable O/M cost is estimated to be 1.0 $/MWh for natural gas-fired and 2.5 $/

MWh for diesel oil-fired respectively referring to the similar plants in the devel-

oping countries in the South-east Asia.

10.3.8. Fuel Cost and Fuel Shift

The fuels applicable to the project are assumed to be diesel oil and natural gas.

(1) Fuel Cost

The fuel prices used in the financial analysis are market prices including the taxes

and duties.

Taxes and duties shown in Table 10.3-7 are considered in the financial analysis.

The import tax for diesel oil is calculated by the standard price of 275 $/ton basis.

10 - 23

Table 10.3-7 Taxes and Duties on Fuel

Fuel Type Import Tax Social Fund VAT

Diesel Oil 20 % 1.40 $/ton 10 %

Natural Gas None *1) 1.40 $/ton 10 %Note: Taxes and duties for natural gas are assumed values.

*1) Natural Gas is assumed to be domestic product.

The fuel cost before taxes and duties are set at 237 $/ton (CIF Price) for diesel oil

and 4.0 $/MMBTU (L.H.V. base) for natural gas. Annual escalation of 2 % is es-

timated for diesel oil and 0 % for natural gas from the year 2001 onwards.

(2) Fuel Shift

As mentioned in the economic analysis, natural gas is expected to be exploited in

Cambodia in future. The timing of fuel shift is assumed as follows as well as

economic analysis.

(a) Natural Gas will be used for whole period of 20-years economic lifetime

from the beginning (Base Case).

(b) Diesel Oil will be used for the first 5 years and Natural Gas will be used for

the next 15 years.

(c) Diesel Oil will be used for the first 10 years and Natural Gas will be used for

the next 10 years.

(d) Diesel Oil will be used for whole period of 20-years economic lifetime from

the beginning.

In line with the fuel shift, the cost of additional gas treatment system of 1.2 Mil-

lion US$ for all stages is also considered.

10.3.9. Depreciation Method

Depreciation method applied to EDC at the moment is accelerated depreciation

method, of which ratios varied from 0 % to 20 % based on the categories as shown in

Table 10.3-8.

10 - 24

Table 10.3-8 Percent of Annual Depreciation

Categories Percents

Land 0 %

Land Improvement 20 %

Administration Building 3 %

Production Building 11 %

Substation 4 %

Generator 11 %

Other Equipment 11 %

Network Equipment 4 %

Vehicle 15 %

Office Furniture 10 %

Source: Finance and Accounting Department of EDC, September 2001

All project cost, including the land acquisition and resettlement, is assumed to be

subject to the depreciation and the average percents of depreciation is also assumed to

be 11 % based on the above table.

10.3.10. Implementation Method

The following two implementation methods for Sihanoukville C.C. Project are con-

sidered.

(1) Option 1 : EDC will implement the project by using official loan.

(2) Option 2 : The private investor will implement the project by his own finance

and loans, and sell the power to EDC based on the Power Purchase

Agreement (BOT).

10 - 25

10.3.11. Finance Arrangement

(1) Finance Sources

The official finance sources such as the Japan Bank for International Cooperation

(JBIC) and the Asian Development Bank, are the most prospective finance

sources for the project in case of Option 1.

For Option 2, the combination of Oversea Investment Loan (OIL) and the com-

mercial bank seems to be applicable.

(2) Loan Conditions and Finance Arrangement

The typical loan conditions offered by official finance sources and commercial

banks are as follows:

(a) JBIC Loan (Yen Loan)

JBIC will finance the 100 % of the foreign currency portion or the maximum

85% of the total project cost.

JBIC loan cannot be applicable to the duties and taxes.

Since Cambodia belongs to the LLDC (Least Less-Developed Country),

RGC (The Royal Government of Cambodia) will be able to borrow the re-

quired fund for the project on the following conditions in case of the stan-

dard loan.

- Interest rate of 1.0 %

- Amortization of 30 years including grace period of 10 years (maximum)

(b) ADB Loan (US$ Loan)

ADB will finance the 100 % of the foreign currency portion or approxi-

mately 90 % of the total project cost including the Interest During Construc-

tion (IDC) based on the “Provincial Power Supply Project”, which was fi-

nanced by ADB. ADB loan also cannot be applicable to the duties and taxes.

The standard loan condition (Special Drawing Right) based on the above

project seems to be as follows:

- Interest rate of 1 % for during the grace period

10 - 26

- Interest of 1.5 % per annum thereafter

- Amortization of 32 years including grace period of 8 years.

(c) Overseas Investment Loan (OIL)

OIL is applicable to the IPP Project, if the Japanese investors are involved in

the IPP. OIL is assumed to finance 60% of the total debt. Other conditions

for US$ Loan are assumed as follows:

- Interest rate per annum = LIBOR + 1.0 % (LIBOR: London Interbank Offered

Rate)

- Amortization of 15 years including grace period of 5 years

(d) Subsidiary Loan

The Loan Agreement will be made between the Banker and the Borrower for

the above a) and b) loans. The Ministry of Economy and Finance (MEF),

Cambodia is the representative of the Borrower. 　

Besides the above Loan Agreement, MEF will re-lend the loan and the RGC

portion to the executing agency (EDC) under the Subsidiary Loan Agree-

ment.

Fig. 10.3-2 demonstrates the examples of Loan Agreement and Subsidiary

Loan Agreement, which seems to be applicable to the “Sihanoukville Com-

bined Cycle Project”.

Therefore, the financial feasibility of the Project is studied by using the

above Subsidiary Loan Agreement.

Subsidiary Loan-1 is the case when the 85% of total project cost is borrowed

from an official finance source (Source-A), and Subsidiary Loan-2 is the

case when the 90% of total project cost including IDC is borrowed from an

official finance source (Source-B).

Cas

e-1

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Inte

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aturity

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(b) C

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Note

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Note

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Yen, an

d P

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in J

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10 - 27

Fig

.10.

3-2

L

oan

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nd S

ubsi

diar

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gree

men

t

10 - 28

10.3.12. Calculation Conditions

Based on the above considerations, the calculation conditions in the financial analysis

are summarized in Table 10.3-9.

Table 10.3-9 Sihanoukville C.C. Project Calculation Conditions

Items EDC Project IPP Project (BOT)

Installed Capacity 90 MW × 2 stages = 180 MW

Annual Capacity Factor(Average 54%)

2006 2007 2008 2009 2010 2011 2012~ST-1 24% 75% 55% 63% 67% 70% 50%ST-2 - - 18% 63% 67% 70% 50%

Station Use 2.8 %

T/L and Distribution Loss 15.7% 0% (Sales at P/S exit)

Salable Energy Generation Energy × 81.94% Generation Energy × 97.2%

Construction Cost for Stage 1 F/C L/C inc. duties and taxes Total (inc. T/L)

After escalation101.6 Million US$

45.3 Million US$146.9 Million US$

Import tax will be exempted.*1)

101.6 Million US$31.9 Million US$

133.5 Million US$Construction Cost for Stage 2 F/C L/C inc. duties and taxes Total (inc. T/L)

After Escalation75.5 Million US$29.5 Million US$

105.0 Million US$

Import tax will be exempted.*1)

75.5 Million US$18.8 Million US$94.3 Million US$

Escalation L/C F/C

2.4 % per annum2.4 % per annum

Disbursement Schedule Stage 1 Stage 2

2004 2005 2006 2007 200822.8% 50.3% 26.9% - - - - 22.2% 51.3% 26.5%

Finance Planning Financial Source Interest Rate (=IDC) Commitment Fee Grace Period Repayment Period Loan Limit Top Front Fee

Finance Source Interest rate (=IDC) Commitment Fee Front End Fee Grace Period Repayment Period Loan Limitation

Subsidiary Loan - 13.5 % per annum-8 years23 years including grace period100 % of F/C or 85 % of the project cost-

Subsidiary Loan - 23.5 % per annum--8 years23 years inc. 5 years grace period100 % of F/C or 90 % of the construc-tion cost inc. IDC

OIL US$ LoanLIBOR+1 % *2) (3.46 + 1 = 4.46)0.25 % of remaining loan5 years15 years60 % of debt portion1.0 % of loan amount

Bank Syndicate LoanLIBOR+2.5 %(3.46 + 2.5=5.96)0.5 %1.25 % of loan amount5 years15 years including grace periodNone

Equity : Debt - 30 % : 70 %

Economic Life Time 20 years

10 - 29

Items EDC Project IPP Project (BOT)

Depreciation Method Accelerated method with 11 % for 20-years economic lifetimePower Tariff as of 2006 ex-cluding maintenance cost ofT/L, D/S and overhead

11.05 ¢/kWh ¢/kWh for PPAPPA: Power Purchase Agreement

Operation Cost Fixed O/M Cost Variable O/M Cost Fuel Cost

ST-1: 40.2 $/kW-year (inc. T/L: 41.5) ST-2: 31.7 $/kW-yearNatural Gas : 1.0 $/MWh Diesel Oil : 2.5 $/MWhNatural Gas : 30.27 $/MWh Diesel Oil : 58.28 $/MWh

Tax and Duties Profit Tax 20% 9 % with 8 years Tax Holiday

*1)

Commencement of Operation Stage 1: 2006 Sep.1 Stage 2: 2008 Sep.1

Discount Rate 10 %

Exchange Rate 1 US$ = 4000 Riel as of 2001

Note : *1) Power Purchase Agreement between Leader Universal Holdings Berhad Delcom Services SDN BHDINTERCORE INC. and EDC, Appendix K, page 94.

*2) LIBOR is 3.46 % as of October, 2001 (Source: www.bankrate.com/brm/news/biz/ratechart.asp)

10.3.13. Calculation Cases and Calculation Results

(1) Calculation Cases

Based on the above considerations, 27 cases as summarized in Table 10.3-10 are

conducted.

(a) Case numbers of 1000s are the cases that the project is implemented by Sub-

sidiary Loan-1.

(b) Case numbers of 2000s are the cases that the project is implemented by Sub-

sidiary Loan-2.

(c) Case numbers of 3000s are the case that the project is implemented by IPP

and the power tariff for PPA, which satisfies the ROE of 20%, is calculated.

Power selling to EDC is assumed at power station outlet.

(d) Case numbers of 4000s are focusing on generation cost excluding VAT and

Profit Tax to compare the power purchase cost from Vietnam and IPP1. And

distribution loss is also excluded for the comparison basis.

In association with the above implementation methods, Table 10.3-11 shows the

summary of the total project cost including all costs.

10 - 30

(2) Calculation Results

Table 10.3-10 also shows the calculation results of the financial analysis and

Case No. 1000, Case No. 2000, Case No. 3000, and Case No. 4000 are demon-

strated in Attachments 3.4 to 3.7.

(a) Project IRR

If the natural gas is used for the full economic lifetime or put into the opera-

tion before the 5th year, the project IRR of 10% is expected. On the other

hand, if the diesel oil is used for the full economic life time, the project IRR

cannot be calculated and the financial attractiveness will be eliminated.

Therefore, from the viewpoint of the project EIRR, the financial attractive-

ness will be expected on condition that the natural gas becomes available

before the 5 years from the commencement of commercial operation.

(b) ROE & DSCR

As shown in Table 10.3-11, since EDC bears IDC portion only under the

Subsidiary Loan Agreement, ROE presents the good performance for any

cases. However, in view of DSCR, the minimum DSCR becomes less than

1.0 or negative if diesel oil is fired more than 10 years during the operation

period. The DSCR less than 1.0 means that EDC has to borrow the addi-

tional loan for the interest payment and principal repayment due to shortage

of own cash.

Therefore, the implementation of the project will be accepted by the Lenders

if the natural gas is warranted to be put into the operation before the 5th year

from the commencement of the commercial operation, unless the implemen-

tation will not be accepted.

(c) Levelised Production Cost

At the priced of natural gas of 4.0 $/MMBTU, levelised production cost in-

cluding taxes and duties under the effective power tariff of 11.05 ¢/kWh

varies from 7.84 ¢/kWh to 9.45 ¢/kWh for the cases that the natural gas will

be put into the project within the first 5 years during the operation period and

10.96 ¢/kWh to 12.85 ¢/kWh if natural gas is put into the project on 11th

10 - 31

year or not put into the project. If the natural gas is available from the begin-

ning of the operation, levelised production cost can be expected to be 30%

less in comparison with the case that the natural gas is put into the operation

on 11th year.

(d) IPP Project

In case of the IPP project, the hurdle rate for the financial feasibility is set at

20 % of ROE. To achieve the ROE more than 20 %, the power tariff selling

to EDC (at P/S exit) requires from 7.70 ¢/kWh to 9.85 ¢/kWh under the con-

dition that natural gas is put into within 5 years and its price is 4.0 $/

MMBTU.

These selling prices will be equivalent to 9.13 ¢/kWh to 11.68 ¢/kWh at con-

sumer’s end level taken into account of T/L and D/L loss of 15.7%.

EDC has to purchase at more expensive cost than that of EDC implementa-

tion because the selling price to EDC at consumer’s end is higher than the

levelised production cost for the case of EDC.

If the diesel oil is used for the full operation period, the selling price of 14.39

¢/kWh to EDC exceeds the expected power tariff of 13.00 ¢/kWh and cannot

be accepted by EDC.

(e) Production Cost without Taxes

- Comparison with the current purchase tariff from IPP1

Attachment 1.3 shows the current EDC’s operation status. EDC purchases

the power from IPP1. in Phnom Penh Operations at 8.94 ¢/kWh (1997) to

10.95 ¢/kWh (2000) based on the PPA. The above purchase prices do not

include the duties and taxes, because EDC bears duties and taxes imposed

on fuel, of which fuel is used by IPP1s, instead of IPP1.

The levelised production cost for Case No. 4000 is excluded duties and

taxes, and profit tax to keep the same cost level with the current purchase

tariff from IPP1.

The levelised production cost of the project of 5.78 ¢/kWh is clearly

lower than the current purchase tariff from IPP1.

10 - 32

- Comparison with the power import from Vietnam

The Royal Government of Cambodia and the Government of Social Re-

public of Viet Nam made an Agreement on Power Sector Cooperation in

June, 1999. Based on the agreement, MIME (Ministry of Industry, Mines

and Energy) and MOI (Ministry of Industry, Viet Nam) entered into

Power Trade Agreement describing the power trade from Vietnam to

Cambodia. According to Power Purchase Agreement signed on July 24,

2000 based on the above agreement, the conditions on the power purchase

from Vietnam are set as follows:

a. Commencement of power purchase : year 200312

b. Source of supply : Thot Not substation via Chau Doc

c. Interconnecting point : Border between Cambodia and Vietnam

d. Metering point : Chau Doc substation

e. Supply capacity : 80 MW between 2003 to 2005

: 200 MW after year 2005

f. Power tariff effectiveness : 5 years

g. Currency in payment : US$

Table 10.3-12 Power Purchase Prices from Vietnam

Peak hours (18:00 ~ 22:00) 8.50 ¢ /kWh

Normal hours (4:00 ~ 18:00) 6.25 ¢ /kWh

Dry Season

(November ~ June 30)

Off-peak hours (22:00 ~ 4:00) 4.50 ¢ /kWh

Peak hours (18:00 ~ 22:00) 8.00 ¢ /kWh

Normal hours (4:00 ~ 18:00) 6.00 ¢ /kWh

Wet Season

(July ~ October 31)

Off-peak hours (22:00 ~ 4:00) 3.00 ¢ /kWh

The average purchase price at the border is estimated to be about 6.0

¢/kWh13.

If the purchase price of 6.0 ¢/kWh at the border price converts to the

12 As mentioned in Section 2.4, available import year seems to be delayed.13 Dry Season = (8.5 x 4 + 6.25 x 14 + 4.5 x 6 )/24 = 6.2, Rainy Season = (8.0 x 4 + 6.0 x 14 + 3.0 x 6 )/24 = 5.6, whole

year = (6.2 x 8 + 5.6 x 4 )/12 = 6.0

10 - 33

equivalent prices at Takeo and at Phnom Penh taking into consideration

of transmission line loss, the above border price will be as shown in Table

10.3-13 in comparison with the levelised production costs of Case No.

4000 and 4100.

Table 10.3-13 Comparison of Purchase Price and LPC

Power PurchaseFrom Vietnam

Levelised ProductionCost (LPC)

At Phnom Penh 6.0 /(1-0.02) = 6.12 ¢/kWh 5.78 ¢/kWh (No. 4000)

At Takeo 6.0 /(1-0.01) =6.06 ¢/kWh 5.73 ¢/kWh (No. 4100)Note) T/L loss from Chau Doc to Phnom Penh and to Takeo is assumed to be 2.0 % and 1.0 % respec-

tively as mentioned before.

Based on the above comparison, it is expected that if the natural gas, of

which exploring cost is 4.0 $/MMBTU, will be put into the operation

from the commencement of the commercial operation, production cost of

the project will be less than the purchase price from Vietnam.

Further more, if the Shihanoukville Industrial Zone is realized in future14,

the project will be more advantageous in virtue of its location.

14 According to ADB information, the improvement of Sihanoukville Air Port from the domestic air port to the interna-

tional air port is under negotiation between RGC and Bangkok Airways to induce the overseas investors.

Tabl

e 10

.3-1

0

Cal

cula

tion

Cas

es a

nd R

esul

ts fo

r Fin

anci

al A

naly

sis

1. C

alcu

latio

n C

ases

Se.N

o.1

23

45

67

89

1011

1213

1415

1617

1819

2021

2223

2425

2627

Cas

e N

o.10

0010

1010

2011

0011

1011

2012

0012

1012

2013

0014

0020

0020

1020

2021

0021

1021

2023

0030

0030

1030

2031

0031

1031

2033

0040

0041

00A

.F

inan

ce S

ourc

es(1

)Su

bsid

iary

Loa

n -1

◎○

○○

○○

○○

○○

○○

○(2

)Su

bsid

iary

Loa

n -2

○○

○○

○○

○(3

)O

IL +

Ban

k Sy

ndic

ate

Loan

○○

○○

○○

○B

Impl

emen

tatio

n M

etho

d(1

)Im

plem

ente

d by

ED

C◎

○○

○○

○○

○○

○○

○○

○○

○○

○○

○(2

)IP

P○

○○

○○

○○

CF

uel C

onve

rsio

n Sc

enar

io(1

)N

atur

al G

as fo

r ful

l 20

year

s◎

○○

○○

○○

○○

○○

○(2

)D

iese

l 5 y

ears

+ N

G 1

5 ye

ars

○○

○○

○○

○○

○(3

)D

iese

l 10

year

s + N

G 1

0 ye

ars

○○

○(4

)D

iese

l Oil

for f

ull 2

0 ye

ars

○○

○D

Nat

ural

Gas

Pri

ce (i

nc. T

axes

)(1

)4.

43 U

S$/M

MB

TU

◎○

○○

○○

○○

○○

(2)

3.88

US$

/MM

BTU

○

○○

○○

○○

(3)

4.98

US$

/MM

BTU

○

○○

○○

○○

ED

iese

l Oil

Pric

e (in

c. T

axes

)(1

)32

6.54

US$

/ton

○○

○F

T/L

from

Kam

pot t

o Si

te(1

) In

clud

ing

T/L

(11.

8 M

.US$

)◎

○○

○○

○○

○○

○○

○○

○○

○○

○○

○○

○○

○○

○(2

)Ex

clud

ing

T/L

○G

Pow

er c

onsu

mpt

ion

at

(1)

Phno

m P

enh

◎○

○○

○○

○○

○○

○○

○○

○○

○○

○○

○○

○○

○○

(2)

Take

o○

HV

alue

Add

ed T

ax &

Pro

fit T

ax(1

)N

o V

AT

○

○

(2)

No

Prof

it Ta

x○

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ote:

◎

mea

ns b

ase

case

.

2. C

alcu

latio

n R

esul

ts1

Proj

ect I

RR

(%

)

St

age-

111

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.710

.56.

67.

15.

93.

03.

42.

6N

.A.

13.2

11.6

12.7

10.5

6.6

7.1

5.9

N.A

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99.

08.

910

.010

.110

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020

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.0

St

age-

216

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.112

.811

.27.

17.

56.

5N

.A.

16.5

16.5

17.7

15.2

12.1

12.8

11.2

N.A

.14

.114

.114

.216

.917

.116

.712

.327

.628

.0

St

age-

1 &

Sta

ge-2

13.5

14.5

12.3

8.7

9.4

8.1

4.8

5.2

4.3

N.A

.14

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.512

.38.

79.

48.

1N

.A.

10.9

11.0

10.9

12.6

12.8

12.5

9.6

23.0

23.4

2R

etur

n on

Equ

ity

(%

)

St

age-

121

022

419

746

4843

14

-2N

.A.

237

210

224

196

4547

43N

.A.

15.0

15.0

14.9

14.7

14.7

14.8

15.0

309

313

Stag

e-2

244

258

230

9194

8833

3531

N.A

.24

424

525

823

091

9488

N.A

.29

.429

.429

.530

.230

.330

.229

.233

734

2

St

age-

1 &

Sta

ge-2

213

226

199

5961

5714

1611

N.A

.23

821

322

619

959

6156

N.A

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.020

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031

43

Min

. Deb

t Ser

vice

Cov

erag

e R

atio

Stag

e-1

1.0

1.1

0.9

1.0

1.1

0.9

0.1

0.1

0.1

-0.6

1.1

1.0

1.1

0.9

1.0

1.1

0.9

-0.6

1.0

1.0

1.0

0.6

0.5

0.7

0.9

1.8

1.8

Stag

e-2

1.5

1.6

1.4

1.5

1.6

1.4

0.2

0.2

0.2

-0.9

1.5

1.5

1.6

1.3

1.5

1.6

1.3

-0.9

1.5

1.5

1.5

2.3

2.4

2.2

1.2

2.6

2.7

Stag

e-1

& S

tage

-21.

51.

61.

41.

11.

11.

10.

10.

10.

1-0

.91.

51.

51.

61.

31.

11.

11.

1-0

.91.

21.

21.

21.

00.

91.

11.

12.

42.

44

Leve

lised

Pro

duct

ion

Cos

t (¢

/kW

h)

St

age-

18.

127.

778.

4910

.07

9.90

10.2

811

.44

11.3

611

.55

13.0

47.

908.

157.

798.

5310

.10

9.92

10.3

113

.08

7.26

6.89

7.66

9.14

8.94

9.34

11.8

66.

096.

02

St

age-

27.

487.

127.

848.

658.

398.

9110

.34

10.2

110

.48

12.5

97.

487.

497.

137.

868.

668.

418.

9412

.61

6.34

5.96

6.73

7.52

7.25

7.80

11.2

55.

405.

34

St

age-

1 &

Sta

ge-2

7.84

7.48

8.20

9.45

9.24

9.67

10.9

610

.86

11.0

812

.85

7.72

7.86

7.50

8.23

9.47

9.26

9.71

12.8

86.

866.

487.

258.

438.

208.

6611

.59

5.78

5.73

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er T

ariff

for P

PA (¢

/kW

h) a

t P/S

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707.

328.

099.

859.

6810

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10 - 34

Table 10.3-11 Total Project Cost and Finance Arrangement for Sihanoukville Combined Cycle Project

1. Subsidiary Loan - 1 (Unit :Million US$)

F/C L/C Total F/C L/C Total F/C L/C TotalConstruction Cost 79.9 16.0 95.9 62.4 8.8 71.2 142.3 24.8 167.1Physical Contingency 3.8 0.6 4.4 3.0 0.4 3.4 6.8 1.0 7.8Price Contingency 8.5 1.6 10.1 10.1 1.4 11.5 18.6 3.0 21.6Duties and Taxes 0.0 24.7 24.7 0.0 18.9 18.9 0.0 43.6 43.6IDC by EDC 7.6 0.0 7.6 5.4 0.0 5.4 13.0 0.0 13.0Associated T/L 9.4 2.4 11.8 0.0 0.0 0.0 9.4 2.4 11.8Total 109.2 45.3 154.5 80.9 29.5 110.4 190.1 74.8 264.9

Amount Portion Amount Portion Amount PortionOfficial Finance Source-A 122.2 79.1% 86.1 78.0% 208.3 78.6%RGC 24.7 16.0% 18.9 17.1% 43.6 16.5%EDC 7.6 4.9% 5.4 4.9% 13 4.9%Total 154.5 100.0% 110.4 100.0% 264.9 100.0%

2. Subsidiary Loan - 2 (Unit :Million US$)

F/C L/C Total F/C L/C Total F/C L/C TotalConstruction Cost inc.IDC 81.7 16.0 97.7 63.7 8.8 72.5 145.4 24.8 170.2Physical Contingency 3.8 0.6 4.4 3.0 0.4 3.4 6.8 1.0 7.8Price Contingency 8.5 1.6 10.1 10.1 1.4 11.5 18.6 3.0 21.6Duties and Taxes 0.0 24.7 24.7 0.0 18.9 18.9 0.0 43.6 43.6IDC by EDC 7.6 0.0 7.6 5.4 0.0 5.4 13.0 0.0 13.0Associated T/L 9.4 2.4 11.8 0.0 0.0 0.0 9.4 2.4 11.8Total 111.0 45.3 156.3 82.2 29.5 111.7 193.2 74.8 268.0

Amount Portion Amount Portion Amount PortionOfficial Finance Source - B 124.0 79.3% 87.4 78.2% 211.4 78.9%RGC 24.7 15.8% 18.9 16.9% 43.6 16.3%EDC 7.6 4.9% 5.4 4.8% 13.0 4.9%Total 156.3 100.0% 111.7 100.0% 268.0 100.0%

3. Overseas Investment Loan + Bank Syndicate Loan (Unit :Million US$)

F/C L/C Total F/C L/C Total F/C L/C TotalConstruction Cost 79.9 16.0 95.9 62.4 8.8 71.2 142.3 24.8 167.1Physical Contingency 3.8 0.6 4.4 3.0 0.4 3.4 6.8 1.0 7.8Price Contingency 8.5 1.6 10.1 10.1 1.4 11.5 18.6 3.0 21.6Duties and Taxes 0.0 11.3 11.3 0.0 8.2 8.2 0.0 19.5 19.5IDC & Financial Fee 8.9 0.0 8.9 6.2 0.0 6.2 15.1 0.0 15.1Associated T/L 9.4 2.4 11.8 0.0 0.0 0.0 9.4 2.4 11.8Total 110.5 31.9 142.4 81.7 18.8 100.5 192.2 50.7 242.9

Amount Portion Amount Portion Amount PortionOverseas Investment Loan 59.9 42.1% 42.2 42.0% 102.1 42.0%Bank Syndicate Loan 39.8 27.9% 28.1 28.0% 67.9 28.0%IPP Own Finance 42.7 30.0% 30.2 30.0% 72.9 30.0%Total 142.4 100.0% 100.5 100.0% 242.9 100.0%

Stage-1 & Stage-2

Stage-1 Stage-2 Stage-1 & Stage-2


Stage-1 Stage-2


Stage-1 & Stage-2


Stage-1 Stage-2

10 - 35

10 - 36

10.4. Conclusion

In the course of the economic and financial analyses, the following conclusions are in-

duced under the current assumed conditions.

(1) Total project cost including the duties and taxes, IDC and other financial fees, and

the associated transmission line from the Site to Kampot is anticipated to be 155

Million US$ for Stage 1 and 110 Million US$ for Stage 2 respectively.

(2) If the natural gas is put into the operation before the 5th year from the commence-

ment of the commercial operation, the good economic and financial performances

are expected. On the other hand, if the diesel oil is fired during the full operation

period, the economic and financial feasibility of the project will not be expected.

(3) Especially, if the natural gas is available from the beginning of the commercial op-

eration, production cost of the project will be much lower than the current pur-

chase price from IPP1 and be less expensive than the power purchase from Viet-

nam in future.

(4) Natural Gas price of 4.0 $/MMBTU seems to be rather conservative in comparison

with the current world market prices15. Therefore, if the natural gas price is avail-

able at less than 4.0 $/MMBTU, more economic and financial attractiveness will

be expected.

(5) Based on the above considerations, Fig.10.4-1 presents the various power costs

related to the EDC activities and results of financial analysis. As shown in

Fig.10.4-1, Sihanoukville C.C. power plant with natural gas firing for full 20 years

operation period presents the lowest cost among the each cost level and is expected

to contribute to reduction of future power tariff of EDC remarkably.

(6) The only issue to be overcome by EDC in order to implement the project seems to

be financial problem. As shown in Attachment 1.4, the current management of

15 According to “2001 World Development Indicators, World Bank”, the average price of natural gas from the year 1998

to 2000 is 2.72 US$/MMBTU at Europe and 2.81 US$/MMBTU in US.

10 - 37

EDC has been suffering from a deficit since 1997. Under the current financial

situation of EDC, it seems to be difficult to bear the IDC, even though the EDC

occupies only 5 % of the total project cost. Since Sihanoukville Combined Cycle

Project requires the huge investment amounted to be around 265 Million US$ and

is the first big project for EDC, the improvement of the EDC management will be

desirable until the implementation of the project.

12

34

56

78

910

Pow

er C

ost

Item

s

Leve

lised

Prod

uctio

n C

ost

for

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nouk

ville

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ars

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rage

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rtPo

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om V

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rage

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om V

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n C

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nouk

ville

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ars

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er P

urch

ase

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e fr

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lleC

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G fo

r 20

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er P

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er P

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ase

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Leve

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n C

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ars

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umed

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riff f

rom

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ards

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rage

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erTa

riff i

n 20

00

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mer

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om P

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hnom

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in P

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mer

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om P

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in P

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om P

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5.78

6.00

6.10

7.84

9.13

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511

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12.8

513

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14.5

7

0.00

2.00

4.00

6.00

8.00

10.0

0

12.0

0

14.0

0

16.0

0

12

34

56

78

910

Related Power Cost (c/kWh)

10 - 38

Fig

.10.

4-1

C

ompa

riso

n of

Rel

ated

Pow

er C

ost

Documents

10. Economic and Financial Analysis